Marketing Research: Actuaries Serving Individuals

72 Pages·2000·0.17 MB·English

MARKETING RESEARCH:
ACTUARIES SERVING INDIVIDUALS
A study funded by the Committee on Finance Research of the Society of
Actuaries
TABLE OF CONTENTS
EXECUTIVE SUMMARY Page 2
Teresa Winer, F.S.A., M.A.A.A
MARKETING RESEARCH PAPER Page 3
Teresa Winer, F.S.A., M.A.A.A.
APPENDIX: BRIEF OUTLINE OF SOURCES OF MATERIALS
FOR ACTUARIES Page 13
Teresa Winer, F.S.A., M.A.A.A
ATTACHMENT I: QUALITATIVE REPORT FOR RETIREE
FOCUS GROUP Page 15
Susan Nassar, Independent Marketing Researcher, Energistics
ATTACHMENT II: QUALITATIVE REPORT FOR PROFESSIONAL
FOCUS GROUP Page 30
Susan Nassar, Independent Marketing Researcher, Energistics
ATTACHMENT III: QUANTITATIVE SUMMARY OF SURVEY
RESULTS Page 39
Teresa Winer, F.S.A., M.A.A.A.
ATTACHMENT IV: TRANSCRIPT OF RETIREE FOCUS
GROUP Page 43
ATTACHMENT V: TRANSCRIPT OF PROFESSIONAL
FOCUS GROUP Page 62
MARKETING RESEARCH:
ACTUARIES SERVING INDIVIDUALS
A study funded by the Committee on Finance Research of the Society of
Actuaries
EXECUTIVE SUMMARY
MAIN PURPOSE OF THE STUDY
To determine the viability of actuarial counseling (actuaries serving individuals).
STEPS OF THE STUDY
1. Develop the overall project, obtaining input from several actuaries and actuarial
committees.
2. Commission Teresa Winer, F.S.A., to coordinate project and give summary.
3. Survey a group of retirees.
4. Hold a focus group among a group of retirees.
5. Hold a focus group among a group of professional advisors.
6. Commission a marketing researcher to hold focus groups, summarize results and make
recommendations.
MAJOR FINDINGS
There is a lack of awareness about the actuarial profession and a lack of understanding of
actuarial skills. This lack of understanding is an obstacle to the continued growth of this
specialty as a profession. With an increased awareness, it becomes evident that actuaries
can provide specific services and fulfill individual needs. From the work accomplished
over the course of this study, we think actuarial counseling is a viable niche for actuaries to
explore.
MAJOR RECOMMENDATIONS
The Society of Actuaries could help increase awareness in the following ways: (1) Expand
the web site and the directory to include listings of actuaries serving these markets. (2)
Utilize the Speakers Bureau for professional development in the legal, accounting and
financial planning arenas. (3) Develop existing links with the ABA and establish new links
with other nonprofit associations to help increase awareness of actuaries, their expertise
and specific services available to individuals as well as to the financial community. (4)
Encourage actuaries to develop continuing education materials for financial planners,
lawyers and CPAs, and work with professional associations to obtain approval for
continuing education credits. More studies should be undertaken to further investigate
potential markets for actuaries.
Promising ways for an independent actuary to serve the individual market include: (1)
Support financial planners by enhancing their services. (2) Develop software and other
services to incorporate actuarial calculations for financial planners. (3) Approach
attorneys through association or industry meetings, or continuing education programs. (4)
Form alliances with lawyers in family practice work.
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The web is a good marketing tool for all markets. Actuaries wishing to be independent
would need to market themselves in yellow page ads, in trade magazines, by writing
articles, etc. In all situations, actuaries should be mindful that general awareness of the
actuarial profession is low.
MARKETING RESEARCH PAPER:
ACTUARIES SERVING INDIVIDUALS
A study funded by the Committee on Finance Research of the Society of
Actuaries
By Teresa Winer
When an actuary identifies his or her specialty as “Individual,” this typically indicates an
expertise in an insurance company’s individual line of business for life and health products, as
opposed to the group line. Many actuaries are employees of an insurance company or a
consulting firm that serves insurance companies and/or employers. Relatively few actuaries
currently work directly with and for individuals. Actuaries can directly market themselves to
individuals or to professionals who provide certain services for individuals. Actuaries serving
individuals might “specialize” in pension, life insurance, health insurance, investments, property
and casualty, etc. This study explores some of the newer markets for actuarial services.
In 1992 an article on “Actuarial Counseling – A New Role” was presented at the International
Congress of Actuaries in Montreal. In March 1996, an article by Jack Bragg was published in
The Actuary, Vol. 30, No. 3. Mr. Bragg’s article discussed a relatively new concept of actuaries
serving individuals. Bragg and Associates developed an assistance kit and several products for
actuaries interested in entering this new field. A Task Force for Actuarial Counseling, within the
Society of Actuaries, was established in 1997.
Recently, the term “Personal Actuary” has emerged. “Retail Actuary” has also been proposed.
Regardless of the terminology used, this study is about actuaries working with individuals.
Leaving the corporate environment to serve individuals has been a risky choice for a few
actuaries. Without a support system, a clear job definition and a market, it is difficult for an
actuary to succeed in serving individuals. The public perception of actuaries is often obscure at
best, and there is a lack of a sense of urgency to look for an actuary even if the need is realized.
The need to find a multitude of small projects and continually market oneself, as well as the fear
of having a much lower income, has kept many actuaries out of this market.
A number of progressive ideas emerged from the focus groups held from this study, which will
enable actuaries to consider their options in this new context. We have discovered that there is a
potential for earning substantial hourly rates, and in excess of $400 per hour for first-rate experts
providing expert testimony. Actuaries are more appreciated and also better paid when working
with certain professionals (such as financial planners or lawyers). Our focus group expected a
minimum of $100 per hour billing rate.
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A lacking ingredient is the clear communication of what needs actuaries can meet and how they
can significantly enhance a professional’s ability to serve his or her clients. The results of this
study will be helpful to those involved in committees on, or interested in, current actuarial issues
such as the “Big Tent” concept, marketing of the actuarial profession, actuarial counseling,
actuary of the future, actuarial education and actuaries in nontraditional roles. It will be helpful
for actuaries as well as for individuals and businesses in diverse markets who have need of
actuarial services.
The participants of the focus groups gave guidance as to the particular areas actuaries could fit in
and how best to market their services. Further market research could help actuaries with specific
start-up recommendations, reducing downtime and guesswork.
This paper summarizes recent marketing research studies for actuaries serving individuals. The
goal of these studies was to explore the areas of need for actuaries and identify potential markets.
The attached qualitative reports, prepared by Ms. Susan Nassar, summarize each 2-hour focus
group. One focus group consisted solely of a group of retirees and the other was held among a
group of selected professionals.
FOCUS GROUPS
As mentioned in the qualitative report, the retiree focus group was drawn from surveying a group
of retirees through North Atlanta Senior Services (N.A.S.S.).(*1) The survey results are
attached. The survey was designed with input from the Task Force on Actuarial Counseling, the
Actuary of the Future Section Council, and the Project Oversight Group from the Society of
Actuaries (SOA). The second focus group session was obtained by recruiting a group of
professionals that would likely benefit from actuarial support.
A freelance marketing research facilitator, Susan Nassar, was hired to lead our focus groups.
She also prepared the attached Qualitative Reports. The purpose of holding focus groups was to
brainstorm and to delve deeper into new ideas for this nontraditional type of actuarial work.
How actuaries could better serve individuals or various professions serving individuals was
explored. In order to obtain insight into specific potential markets for actuaries, we purposely
did not define the term “actuary” for the groups, nor did we suggest a limited type of work that
actuaries could potentially perform. The market researcher purposely acted less knowledgeable
than the participants, in order to generate ideas in a non-judgmental, brainstorming fashion.
RETIREE GROUP RESULTS
The retiree market is of primary interest because of its large existing size and future projected
growth. The primary fear among retirees is outliving one’s assets. There currently is a lack of
trust of representatives in this field based on a fear of exploitation by con artists.
The results from this group reveal applications for the retail market for all ages. The benefit of
talking to retirees included their ability to reflect upon their needs with hindsight, and their recent
experience when confronted by a myriad of important financial decisions prior to retirement.
Based on our focus group discussion, many retirees remembered considerable confusion when
presented with pension and insurance options upon retirement. An actuary has a wealth of
comprehensive knowledge that could be most helpful in providing guidance with financial
decisions just prior to retirement. Due to a time limit on when many financial decisions must be
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made, the need is compelling for an ethical, factual and unbiased opinion. The difficulty of
reaching the preretirement market would be that these persons generally do not anticipate
decisions looming ahead, and therefore cannot appreciate the need for help from actuaries.
Out of approximately 100 attendees to the “LifeSpan” luncheon, about 40% returned a
completed survey. Gary Mevorah, a pension actuary exploring the field of serving individuals,
delivered a presentation to the group prior to handing out the survey. Mr. Mevorah clearly
explained the function of actuaries and expressed the need for their help in our study. We were
asked by N.A.S.S. management to keep the survey as simple and short as possible. The survey
questions were therefore inherently general and non-detailed. We had a very good response rate
among this group.
The retirees who completed our survey were highly educated overall. Twenty had Bachelor’s
degrees, eight had Master’s degrees, and four had Doctorates. Only one had not finished high
school and one gave no answer. The average age of those who reported their age (41 out of 44)
was approximately 71 years old. On the questionnaire, we specifically asked about interest in
participating in our focus groups. We recruited from the few who indicated any interest in
participating, and this numbered about ten persons.
We were ultimately only able to recruit four persons out of the group of 100 to participate in the
focus group from all that indicated any interest in the survey. The other four were recruited from
outside the “LifeSpan” group. The persons we recruited were extremely helpful and are greatly
appreciated.
At the end of the retiree focus group session, Gary Mevorah and David Bragg (Bragg and
Associates) explained their particular niches and offered products and services to the focus group
participants. Services offered by Bragg and Associates and Gary Mevorah were at no cost to the
participants.
Mr. Mevorah currently offers his pension review services for “free,” with an expectation to
collect a percentage on the back end (for helping rectify pensions that may be incorrectly
computed). Only two out of the N.A.S.S. group requested the “StatusQuote” product from
Bragg and Associates (a personalized life and health expectancy document). Additionally, one
participant recruited from outside of N.A.S.S. requested the free pension review from Mr.
Mevorah and two more from outside the group requested the “StatusQuote”. These individuals
were given ample opportunity to request free products and given full explanations of the services
offered by Mr. Mevorah and Mr. Bragg.
This study was not large enough to be statistically valid for the entire retiree population.
However, anticipating that approximately 2 out of 100 retirees may be interested in actuarial
services could be reasonable for an actuary pursuing this market. An actuary could potentially
increase these odds by targeting or specializing in highly educated retirees, such as retired
physicians, university professors or other niches.
Even though an actuary serving the retiree market might need to prepare for a low percentage of
retirees to have an interest in actuarial services, the retiree market is very large and is growing
rapidly. Gaining access through “niche group” marketing to a large number of retirees, the
potential for finding many clients is especially promising.
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The Survey
The information from the survey was especially valuable because we did not get the answers we
expected.
In comparing the focus group participants’ comments with their respective survey answers, I
observed many differences in responses. For example, the focus group participants, as well as
the majority of retirees surveyed, indicated in their survey answers that they felt they understood
their insurance policies. However, in the focus group, none said they had read their policies and
several were confused by the terminology. Other differences were found. The survey answers
would lead one to believe that these participants trusted their insurance company. In contrast,
during our focus group discussions, some of those individuals stated that insurance companies
intentionally used confusing policy language.
A difference appeared in many of the questions regarding whether or not the participants felt
comfortable making financial decisions and/or choosing insurance options. In the short written
survey, people expressed confidence about their knowledge. In further focus group discussions,
many doubts arose, indicating minimal knowledge. Many expressed a need for more guidance in
making some of their decisions.
One specific example of the importance of the focus group’s detailed discussion was that
opposite answers were given by one individual in one of the survey questions (#9) versus the
discussion. The individual answered “no” to question #9, indicating that she did not have trouble
collecting any insurance claims in the last 5 years. The same individual in the focus group
complained extensively about having trouble collecting on her husband’s recent disability
benefits (due to confusion about terminology and whether or not he had a pre-existing
condition). This could lead one to conclude that some individuals are reluctant to discuss areas
where information deficits or negative experiences exist until confidence and/or a certain level of
trust is established with individuals or groups. Though it is difficult to understand why, there
may have been many such oversights made in answering this survey.
Even though an overwhelming number of respondents (39 out of 44) indicated that they had not
had trouble collecting on any insurance claims in the last five years, in reality, they may well
have had many problems in collecting on such claims.
The survey contained short, written questions, especially the yes/no type. Additionally the
questions were broad and a relatively short time period was given to answer them. Some may
have been embarrassed to admit a lack of knowledge. For many reasons, a discussion was
apparently necessary to ascertain the true opinions and needs of these individuals in their
insurance and financial matters.
Because of the contradictory results from our retiree group, a survey would need to be designed
differently from this one and would need to be tested extensively to enhance reliability.
Retirees – A Summary of the Qualitative Report
The Qualitative Report from the Retiree Focus Group session is presented in three sections. The
first section lists key findings, which include key issues among both older retirees and younger
adults. The second section is titled “Conclusions.” The conclusion indicates a lack of
knowledge of services that actuaries could provide. The third section includes recommendations,
with some interesting ideas on how to promote actuarial counseling.
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As the Qualitative report indicates, there is a need for independent, fee-based actuarial
counselors. The lack of knowledge by some of the retirees was surprising given the number of
financial advisors, brokers, accountants and lawyers that exist. One of the primary needs of this
group seemed to be knowing when and how much money to withdraw from retirement accounts.
Incorporating the probabilities of death, disability and sickness could help people evaluate
different “scenarios” in their future.
If the survey participants did need an actuary, where would they look to find one? Given the
SOA as a multiple-choice option, a large number said they would ask the Society of Actuaries
for a recommendation. Others would look in the Yellow Pages. According to the attorneys in
the professional focus group, Yellow Page ads may appear negative for actuaries seeking expert
witness or legal work. Some actuarial counselors may want to stay away from Yellow Page
advertising. This would indicate a large opportunity for the SOA to promote actuaries to the
public and offer assistance in identifying those actuaries wishing to counsel individuals.
Registration and/or classification of actuaries as actuarial counselors would help connect them
with those in need.
As stated in the Qualitative Report, most people do not necessarily know how an actuary could
help them. Until the public becomes more aware of actuaries, especially as being “on their side,”
actuaries looking for work with individuals in the counseling field may find greater success
linking up with financial planners, lawyers, accountants, brokers, and the like.
PROFESSIONAL GROUP RESULTS
Unlike the retiree group, the professionals were more likely to have heard something about
actuaries. Like the retiree group, these professionals had confusion in identifying the areas in
which actuaries are most expert.
The professions represented by this focus group included trial lawyers, divorce attorneys,
financial planners, estate administrators for banks, CPAs, brokers and investment advisors. The
most promising future role for actuarial counselors is working with attorneys and financial
planners. Summary comments for those two professions are given below. Not only is the need
for an actuary very clear, but higher billing rates are fairly well accepted.
Attorneys
One major trial firm represented recently took state tobacco litigation to trial. The experienced
trial attorney in our focus group had recently searched for an actuary for help in another case, but
was unable to a find an actuary or a consulting firm willing to go against the insurance
companies involved. Actuaries willing to cross that road would presumably find a lot of work.
A second trial lawyer, a junior level person, worked for a local firm that has employed Dr. John
Brown as an expert witness. Dr. Brown bills himself as a “Consulting Economist”. He does not
have an actuarial designation but did teach for many years in Georgia State University’s
Actuarial Science Department. The economist term is based on the legal use of valuing
economic portions of a claim versus noneconomic portions. One would expect that an actuary
would be the best expert for valuing economic loss such as disability, loss of income, death, etc.
However, to the typical individuals participating in a trial, there exists little or no previous
association with actuaries or their work and thus the actuarial profession is not widely
understood.
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Another attorney, specializing in family practice (divorce, etc.), felt that actuaries would be very
useful as advisors and/or expert witnesses involving benefit calculations, life expectancy, “health
expectancy”(*2) and financial asset calculations. Actuarial advice would be particularly helpful
in the retirement/benefits assessment area, alimony projections, and the like. This market should
be the domain of actuaries, but again the lawyers look to other expert general economists,
statisticians or mathematicians.
In order to operate as an expert witness, it is generally accepted that one needs impeccable
credentials, “lots of letters behind their name,” and even endowed chairs at Universities for
handling the top cases. Presumably there would be many cases where actuaries should be
involved. Unfortunately, the only way to “advertise” to this group is to speak at national
association meetings or by word of mouth. The SOA could help greatly by providing a list of
names, without specifically recommending certain actuaries, to individual attorneys, legal groups
and associations, and also, by placing ads in major newspapers, professional journals and
national magazines, explaining the advantages of seeking actuarial assistance in legal
proceedings.
Financial Planners
Full-time employment would be a great possibility for an actuary teamed up with a financial
planning firm. Financial planners seem almost desperate for someone to help them decipher
insurance illustrations. They also would like software that appropriately reflects many
contingencies in investing their clients’ money.
Whether operating on a fixed cost or hourly basis, actuaries enjoy high recognition among these
professionals. A financial planner is making recommendations and giving advice on a wide
range of financial decisions for clients. An articulate actuary would be able to work well with
financial planners, bringing comprehensive skills for overall analysis that facilitate the financial
planners ability to advise their clients. Depending upon the circumstances, an actuary may
advise only the financial planner or advise the client directly. Some financial planners would
like an actuary to talk to their clients and some would prefer the actuary be only in a “back
office” set-up.
Recently, Forbes magazine published a related article titled “Eight Steps to Salvation” in its
December 27, 1999 issue. The article advocated the use of actuaries in financial situations,
giving two specific examples. One was to “design a special defined-benefit pension plan” for a
small business owner and the other was to “analyze a policy’s return and outline your options.”
The article specifically recommended ways to avoid the costs of a full-blown “comprehensive
financial plan.”
Actuarial expertise is needed in the financial planning field today. One of our focus group
participants, an investment advisor with a math degree, has already incorporated mortality
assumptions into a modeling program operated in a spreadsheet on his laptop computer. The
advisor is using Group Annuity Mortality tables in 30-year projections of investment scenarios.
Monte Carlo techniques are used to randomly generate some of the assumptions. Mortality
tables are adjusted with arbitrary factors. This particular advisor is planning to market his
program to the industry. In his words “I don’t know that I have the best mortality or the right
mortality, but you know what, I guarantee my users don’t know.”
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The credentials of those working in the financial planning field vary greatly. Actuaries could
add much more legitimacy and discipline to this field by lending their expertise. Actuaries
should capitalize on their broad education and superb credentials. As in all careers, much will be
learned outside of the actuarial examinations, but this could occur easily on the job.
Financial planning firms are not the only places to provide actuarial support work. Banks
provide financial advisory services in their estate administration and other divisions. With
restrictions being lifted for bank holding companies to own insurance companies, actuaries may
be able to create new avenues into the banking side.
Billing
The primary recommendation here was to mirror the market being served. For example, the
legal profession typically bills hourly, except in the case involving a fixed fee for service, such as
preparation of simple wills, real estate transactions, etc. The financial planning market would
prefer more packaged services at one fee. There could be a lack of understanding as to how
many hours various jobs would take. Actuaries need to make clients feel comfortable and
overcome hourly billing fears by using a fee-based method.
Interest in Services
Our professional focus group was held on a Thursday evening in the Buckhead section of
Atlanta, on what happened to be one of the worst traffic nights of the year. As a result, we
started about 30 minutes late. We ran out of time at the end to explain the free actuarial services
being offered. The professionals were asked to stay after the meeting to talk to Mr. Mevorah and
Mr. Bragg about the actuarial services we offered, but few could stay late. We did, however, feel
fortunate to have so many participants who contributed some great ideas during the session itself.
Given more time, we would have been able to gauge the interest in the actuarial services offered.
MAJOR FINDINGS
Visibility
It is clear from both of the focus group discussions that actuaries are not visible enough. For the
professional group, a concerted effort needs to be made for actuaries to develop “continuing
education” materials for certain professions, and associated presentation materials, which could
bring actuaries into the picture. Additionally, actuaries could offer much in the way of software
to help financial planners better understand their clients’ risks and help communicate these risks
to individuals.
Actuaries need to find short, user-friendly phrases to describe what they do. Terminology such
as “modeling contingent events” is good for some markets, but not others. An actuary needs to
be able to shake someone’s hand and describe what he or she does in simpler terms. More
marketing research would be helpful in developing terminology for the individual market.
When professionals realize a need for an actuary, they are at a loss as to how to find one. The
SOA could at least organize this new specialty and make a link on their web site so that
professionals and individuals can locate an actuary in their geographical or specialty area.
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The SOA could cultivate and utilize its relationships with other professional association groups,
such as the ABA. The SOA could provide materials as well as a list of actuaries interested in
serving as expert witnesses. Enhancing links to the ABA and other associations by providing
lists, finding continuing education synergies, and sharing materials could facilitate connections
to other professions. It is difficult for actuaries to break into the legal market without such
assistance.
Forbes magazine reported in its November 29, 1999 issue that “These days actuaries come with
personalities.” Although “old stereotypes die hard,” as the magazine quoted, our focus group
professionals would love to find actuaries with personalities.
Recently, a study by the Metro Atlanta Chamber of Commerce indicated that people skills are
very important, especially in areas where it is difficult to evaluate technical proficiency. As
reported by the Atlanta Journal on November 18, 1999, the study “looked at the needs of 40
Georgia firms in eight key industries such as manufacturing, health care and services.”
“Whether the job was low tech or high tech,” people skills were key.
The results of our marketing survey were similar. One lawyer said that any person he worked
with would need to pass the “drink a beer” test. That is, it was important for the lawyer to feel
comfortable with an actuary or anyone else he would want to work with. Being able to explain
actuarial concepts to laymen is important, especially to explain the technical work of actuaries.
Related Marketing Issues
A major issue that came out of the focus groups was a lack of awareness about actuaries. The
purpose of our marketing research was to determine the viability of actuarial counseling as a
profession. A lack of recognition impacts the viability of the profession. Solving problems, such
as the lack of recognition, is not a part of this project directly, but some suggestions came out of
this study. One suggestion for marketing the actuarial profession that came out of the
professional focus group was to hold more focus groups!
The public generally recognizes the acronyms ABA, CPA, CFP, AMA, but does not recognize
SOA, AAA, MAAA, FSA or EA. A marketing campaign could help and could be targeted, such
as to trade magazines for specific groups, to keep costs down. Lack of recognition is a major
obstacle for actuaries to overcome in serving individuals. As mentioned in page 5 of this article,
by placing ads in major newspapers, professional journals and national magazines, the
advantages of seeking actuarial assistance could also be explained in the case of financial
planning.
“The vision of the Society of Actuaries,” according to its 1999 yearbook, “is for actuaries to be
recognized as the leading professionals in the modeling and management of financial risk and
contingent events.” While the Society has prepared actuaries well, there is much to be done to
achieve the “to be recognized” portion of the vision statement.
As we move into the new millenium, actuaries and their organizations may think about
repositioning to gain more public awareness. Historically, it was not necessary to market
actuaries or the SOA. The insurance, health and private pension industry, the primary market for
actuaries, was already well aware of the profession and jobs were plentiful. In the past, the SOA
could afford to devote energy solely to education issues, without worrying about demand issues.
The equation is becoming unbalanced, and there is a need for marketing somewhere in an
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